A recent study conducted by Experian anticipates about $265 billion in home equity lines of credit (HELOCs) will begin entering a repayment period, affecting millions of consumers. HELOC originations, which continued to increase from 2005 until the start of the housing crisis, are generally divided into two periods. For the first ten years, a HELOC remains in the draw period, which allows consumers to use the line of credit while making minimum, interest-only payments. After ten years, many HELOCs enter the repayment period. This may cause a hike in monthly payments, sometimes as much as triple or quadruple the monthly payment amount during the initial draw period. Debt-relief consultants anticipate defaults to skyrocket as these HELOCs enter the repayment period.
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Debt Collector Communications Under the Fair Debt Collection Practices Act (“FDCPA” or the “Act”)
May 19th, 2014
The FDCPA was developed in part to help prevent abusive practices in debt collection and to allow consumers the opportunity to dispute the validity of a debt. The FDCPA applies when a debt collector attempts to communicate with a consumer debtor. While the initial communications may not violate the Act, generally, the Act prohibits further communication when the debtor notifies the debt collector that he or she is requesting more information on the debt or disputes the debt. The Act will typically apply to communications the collector may have regarding the location of the debtor and communications between third parties or the debtor regarding the debt collection. The debts subject to this Act are generally those incurred by a consumer primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment. Florida adopted the Consumer Collection Practices Act (“FCCPA”) which acts to supplement the FDCPA. The FCCPA also protects debtors from a debt collector’s abusive collection practices but, unlike the FDCPA, the FCCPA also applies to the original creditor. As always, you should consult with a Florida licensed attorney who may be able to help protect you from improper collection efforts.
See 15 U.S.C. §1692 (a)-(p); see also, §§559.55-559.785, Fla. Stat.
Using Bankruptcy to Discharge Student Loan Debt
April 29th, 2014
In order to discharge student loan debt in bankruptcy, a debtor must show that repaying the student loan debt will cause undue hardship.
Florida Bankruptcy Courts will typically apply the Brunner test when attempting to determine undue hardship. In order for a debtor to meet the Brunner standard for undue hardship, the debtor must show “(1) that the debtor cannot maintain, based on current income and expenses, a ‘minimal’ standard of living for herself and her dependents if forced to repay the student loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.” In re Cox, 338 F.3d 1238, 1241 (11th Cir. 2003), quoting Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987).
If you are having financial difficulty due to student loans or other debts, you should consult with a licensed Florida bankruptcy attorney.
Credit Reports After Bankruptcy
November 5th, 2013
Many clients have questions about improving their credit post-bankruptcy. A successful bankruptcy eliminates or discharges a debtor’s legal obligation to repay a debt. However, it does not place an affirmative duty on a debtor’s creditors to remove any pre-bankruptcy non-payment history on credit reports. In other words, a bankruptcy may clean up legal obligations, but it does not affect credit reports unless the creditor voluntarily corrects its reporting. Experian, Transunion, and Equifax are the national credit reporting agencies.
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What Happens to the Interest and Penalties Accruing From Tax Debt in a Chapter 7 Bankruptcy?
August 10th, 2013
Interest follows the tax liability. See In re Burns, 887 F.2d 1541 (11th Cir. 1989). If the tax debt is non-dischargeable, then the interest accruing on the tax debt will be non-dischargeable. “[A] tax penalty is discharged if the tax to which it relates is discharged […] or if the transaction or event giving rise to the penalty occurred more than three years prior to the filing of the bankruptcy petition.” In re Burns, at 1544. If the tax liability is non-dischargeable, but the penalty portion of the liability is, then the interest which follows the tax is non-dischargeable but the interest which follows the penalty is likely dischargeable.
What Happens to a Federal Tax Lien After Chapter 7 Bankruptcy?
July 29th, 2013
Many taxpayers assume that the IRS cannot collect for income taxes that were owed prior to, but discharged in, a Chapter 7 bankruptcy. That is not always the case. It is true that the Chapter 7 bankruptcy discharges the IRS claim as to personal liability (assuming all elements for dischargeability are met); however, many times the IRS will record a federal tax lien for the amount(s) owed. If the federal tax lien is recorded prior to the bankruptcy, it will usually survive a Chapter 7 discharge. A tax lien that was recorded prior to the Chapter 7 bankruptcy attaches to most pre-bankruptcy property, including property that would otherwise be exempt from creditors under Florida law such as a taxpayer’s homestead, IRA, or 401(k). The lien gives the IRS the ability to seize or demand payment up to the value of the secured property after bankruptcy.